CORPORATE MODEL OF INDIAN RAILWAYS
Published by: Gautham K
Corporate Model of Indian Railways is a nascent prototype that is actively stressed by the Indian railways for outsourcing the management of passenger trains to PSU, the IRCTC. This model enables IRCTC to decide on service framework and also alter them without the approval of the railway ministry. The corporate model is perceived as an “Experiment” function extending to the leasing of 100 routes to private entities to facilitate the running of 150 trains. IRCTC has introduced its third train, the Kashi Mahakal Express, after the successful running of two Tejas Express.
Corporate Train Model:
The corporate train model enjoys full autonomy and flexibility in the administrative and management affairs of the running of the trains that are within their jurisdiction. One of the imperative reasons for such autonomy is the contributing feature of its corporate personality. This corporate management is well received by the passengers as it enhances the quality of service and provides for better user experience. IRCTC constructs the entire business model that includes the number of stoppages to be made, onboard facilities, housekeeping, etc. The railway ministry has the power to frame policies for IRCTC to operate and conduct its affairs.
The material infrastructure of the train involving coaches, locomotives remains with the Indian railways. This model works as leasing that enhances IRCTC to avail the assets of Indian railways to run trains. The corporation takes all the decisions in this model pertaining to service providence which includes fare, foods, complaints, etc. Indian railways are the owner of the network and receive a predetermined amount from IRCTC. The outsourcing of running trains by the PSU has enabled the Indian railways to receive a decided sum of amount for enabling IRCTC to run trains at their discretion.
The amount to be paid varies in three components being haulage, lease and custody. Haulage charges are incurred for the periodical use of fixed infrastructure such as tracks, driver, signaling. All the activities that result in the motion of the train are covered in haulage. Leasing charges are paid by IRCTC as railway coaches are leased to the Indian Railway Finance Corporation. Custody charges are levied as a security charge and on a daily basis for keeping the rake safe at the custody of PSU.
Private Train Model- Comparison:
Private entities enjoy significant exemptions from these charges of haulage, lease, and custody compared to IRCTC. In the private model, the operators engage differently wherein they agree to share revenues along with haulage with the Indian Railways. Among the numerous private operators, the ones who agree to dispense the greater revenue percentage avails the contact. Private operators may be exempted from paying lease and custody charges since it is expected that the private operators have their personal rolling stock at their possession and such decisions are solely at the discretion of the Indian railways. This is because in the next five years, private operators would witness numerous opportunities in the standard railway lines to accommodate more passenger trains to operate and cater to demand. The government favours the intervention of both private players as well as IRCTC as it would lessen the burden of managing and administering the running of trains.
Indian Railway Finance Corporation:
IRFC is an agency and dedicated financing extension of Indian railways that mobilizes funds from domestic and overseas capital markets. It is responsible for the arrangement of funds for state-owned railways. The receipts are used to purchase assets such as wagon coaches, engines, expansions of the railway system. IRFC is efficient in project funding as it has tied up with LIC, the largest insurer and it channels long term funds from the insurer to Indian railways. It was set up in December 1986 and is a public sector enterprise. IRFC is directly under the administrative control of the Railway Ministry. For the past 30 years, IRFC is responsible for contributing to the expansion of Indian railways by providing financing assistance through its annual plan framework.
The primitive object of IRFC is to address the Extra Budgetary Resources needs of the Indian railways. It seeks to achieve this through borrowings of the market at the most contentious price and terms. IRFC’s principle focuses on borrowing money from the financial market for the creation of assets whereby leasing to the Indian railways.
The model of corporate characteristic has paved the way for the Indian railways to operate and function in a smooth manner. The corporate model-assisted Indian railways to share the burden of running of trains and its management. Due to the intervention of the corporate model, Indian railways are free from the suffering of losses as they receive a predetermined amount in the form of leasing charges. Adding to this, the leased compartments and other physical infrastructure of the Indian railways are provided with due care and maintenance by IRCTC. The railways generate hefty revenue in the form of varied components charges estimated around two lakhs rupees per day. Along with the payment made by IRCTC for the component charges, a proportion of profit earned by them is also appropriated by the Indian railways.
Tejas Express is the first successful corporate train run by IRCTC on the Delhi-Lucknow route. This commercial train decreases the traveling time of its journey to 6.15 hours making it the fastest train in its route. The schedule of the train is formulated to commence from Lucknow at 6:10 am reaching New Delhi at 12:25 pm. The return journey is scheduled from New Delhi at 2:35 pm and reaches Lucknow at 10:05 pm. Tejas Express was introduced as an experiment and if successful, would invite many private players to run trains. The express has many fresh and attractive features. It also facilitates payment to the passengers for its delay and 25 lakh rupees are insured for every passenger traveling on this express. The pricing of this express is fixed at Rs. 1,280 for AC coaches and Rs. 2,450 for executive coaches. Tejas Express also facilitates and promotes healthy competition as it outperforms and provides unique services from that of its competitors.
Though the corporate model was initially introduced as an experiment, it has the necessary and vital potential to transform the railways' administration into a trend. The unique set of services and quality assistance provided by them has contributed and resulted in its success. Currently, there are only three types of corporate model trains running but railways will introduce and encourage many private operators to run trains.